Tax Credits (Working Families)

Catherine West Excerpts

Tuesday 7th July 2015 Commons Chamber

[Shabana Mahmood]

I am afraid that the boy-band operation on the Government Back Benches is a little unimpressive. Rather than give way for a further Whip’s question, I shall make a little more progress.

Another argument advanced by Government Members in recent weeks is that tax credits have been subsidising poverty pay. There is academic and expert evidence that they have not depressed wages at the lower end, and that there has been no general slippage in the part of the earnings distribution where they bite. For the sake of argument, however, let us agree that in an ideal world we would not even take the risk that tax credits might depress wages, or subsidise low or poverty pay. Indeed, let us agree that we would ideally want a system in which they were not needed at all, because everyone could earn a high enough wage to manage perfectly well without them. If the Government were serious about that, they would come forward first with proper and realistic proposals for increasing wages and tackling low pay, and then start thinking about reform of tax credits. Instead, they are putting the cart before the horse and doing things the wrong way round, salami-slicing the tax credits budget but without any credible plan to get wages up before the cuts bite. The Government have no plans to ensure working families do not lose out from their tax credit cuts.

Instead of tackling low pay, the Conservatives are attacking the low paid, and they have form: they cut tax credits 14 times in the last Parliament, including cutting the childcare element of working tax credits from 80% to 70% of a child’s childcare costs, costing some working families up to £1,560 a year—an average loss of £570 per year—and increasing the working hours threshold for couples to qualify for WTC from 16 to 24 hours per week, with an average loss of £2,600 for families unable to increase their working hours, according to research commissioned by us from the House of Commons Library. We also know that a number of indicators suggest that the recovery is not feeding through to job security and pay growth for those who have to rely on tax credits.

[Catherine West (Hornsey and Wood Green) (Lab)]

Has there been an equalities impact assessment of this measure, which will be introduced tomorrow?

[Shabana Mahmood]

My hon. Friend raises an important point, and we will have to see whether we get any additional information on the impact on equalities ahead of the Budget, but we already know from what we saw over the last Parliament that women are disproportionately affected when the Government start to cut tax credits, as are black and minority ethnic communities.

--- Later in debate ---

[Mr Gauke]

My hon. Friend makes a reasonable point. There was a certain correlation between the previous Government’s generosity and election years.

The Government are bringing in a raft of measures to help working people. We are giving this nation’s children the best start in life. We have increased our spending on childcare and early-years education by £1 billion. We have given 15 hours of free childcare entitlement to all three and four-year-olds, as well as to the poorest 40% of two-year-olds, and we are doubling that for families in which both parents work. We are extending the right to request flexible working to all. Through tax-free childcare we are giving 20% support on childcare costs, up to £10,000 per child. Universal credit will increase the childcare support for low-income families to 85%. Our pupil premium and early-years pupil premium are giving schools, nurseries and childminders additional money to ensure that children from the most disadvantaged backgrounds do not fall behind. Through our childcare business grant scheme we have 4,500 new childminders and over 30,000 new childcare places.

[Catherine West]

Will the Minister give way?

[Mr Gauke]

I will give way for another short intervention.

[Catherine West]

Will the Treasury be doing a proper equalities impact assessment for tomorrow’s statement?

[Mr Gauke]

We will perform the required assessments, as we always do.

The best way to prosperity is still employment. The past five years have seen a jobs miracle—1,000 jobs a day; 2 million in total. For every job lost in the public sector, the private sector has created over five and a half more. I simply do not accept Opposition claims that they have somehow been second-class jobs on part-time or zero-hours contracts. Over the past year 85% of jobs created have been full time and 92% have been high or medium skilled. Unemployment has fallen by 349,000 people over the past year alone. That is 349,000 more people standing on their own two feet, and 349,000 households with greater financial security.

We want to continue our fantastic record on jobs so that we achieve full employment in the UK. We are providing our young adults with a route to employment through a record number of apprenticeships, and we have committed to supporting 3 million new apprenticeships. We will work with our Jobcentre Plus network to provide routes into work experience and apprenticeships for young people leaving education.

When people are in work, we will cut their taxes. We have increased the tax-free personal allowance for 27 million people, from £6,475 to £10,600 this year. That will rise to £12,500 by the end of this Parliament. We will enshrine the concept of a tax-free minimum wage in law. We will also raise the 40p income tax threshold to £50,000, because that should be for high earners, not middle earners. Already, a typical basic-rate taxpayer is paying £905 less income tax than in 2010, and by 2017-18 we will have lifted over 3.7 million people out of income tax altogether.

We have frozen fuel duty since 2011 and council tax since 2010. We have said that over the next five years we will not raise income tax, VAT or national insurance contributions. Our record low inflation is keeping down the cost of household goods. We have increased the national minimum wage by 3.1%—3.3% for 18 to 21-year-olds—thus benefiting over 1 million people. At the same time, wages have increased by 2.7% on the year for the three months to April. That all means more money in people’s pockets, more incentives to work, and a fundamental shift from dependency and towards productivity.

Back in 2010 we were a country living beyond our means and with worrying signs of being addicted to that lifestyle. Whenever that is proved to be unsustainable—something that global markets have a habit of proving—the poorest and the most vulnerable are hit the hardest. That is what we wanted to avoid, and that is why we have strived so hard to turn around Britain’s economy. Despite the best efforts of the Labour party, which opposed every difficult decision we took on the path towards recovery, we have achieved a lot. We have shielded the most vulnerable and those on the lowest incomes and have asked those with the broadest shoulders to bear a heavier burden. We have given greater economic security and a higher standard of living to millions of people in this country. At every opportunity, we have stood up for those who want to work and do the right thing. We have promoted work and helped create the opportunities to work. We have helped people to achieve their goals and secure themselves a brighter future. We have done all this while cutting the deficit and creating the highest growth in any of the major advanced economies. It is a record we are proud of, and one we will continue.